A.C.I.T. CIRCLE 19(2), MUMBAI V. LIBRA CORPORATION, MUMBAI

ITA 4527/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5741 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 04-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Keywords: Business income; Difference of opinion
• Section: 143(3)

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIVEK VARMA, JM ./I.T.A. NO.4527/M/2012 ( / ASSESSMENT YEAR: 2008 - 2009 ) ACIT - CIRCLE 19(2), R.NO.315, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI 400 012. / VS. M/S. LIBRA CORPORATION, HOLM CROFT, 25, S.V. ROAD, SANTACRUZ (W), MUMBAI 400 054. ./ PAN : AACFR 6072 M ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI M.L. PERUMAL / RESPONDENT BY : MS. ARATI VISSANJI / DATE OF HEARING : 30.1.2014 / DATE OF PRONOUNCEMENT : 30.1.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 4.7.2012 IS AGAINST THE ORDER OF THE CIT (A) - 30, MUMBAI DATED 4.4.2012 FOR THE ASSESSMENT YEAR 2008 - 2009. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN DELETING PENALTY U/S 271(1)(C) OF THE ACT AMOUNTING TO RS. 40,00,000/ - AFTER CONCLUDING THAT ADDITION WAS CONSEQUENCE OF DIFFERENCE OF OPINIO N WITHOUT APPRECIATING THE FACTS THAT OFFERING INCOME EITHER UNDER THE HEAD OF BUSINESS & PROFESSION OR CAPITAL GAIN SUBSTANTIAL EFFECT ON THE RATE OF TAX AND THUS REDUCE THE TAX LIABILITY WHICH CAN ALSO WELL BE TERMED AS FURNISHING OF INACCURATE PARTI CULARS OF INCOME. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUCTION AND HAD ENTERED INTO A DEVELOPMENT AGREEMENT ON 8.2.1997 WITH M/S. JAYCEE CONSTRUCTION CO ., WHO WAS 2 GIVEN THE RIGHT TO DEVELOP A PLOT ADMEASURING 1791.45 SQ.MTS. THE ASSESSEE FIRM RESERVED AND RETAINED THEIR RIGHT, TITLE AND INTEREST IN 28 CONSTRUCTED RESIDENTIAL FLATS, EACH NOT BEING LESS THAN 40 SQ.MTRS IN THE BUILDING TO BE CONSTRU CTED BY JAYCEE CONSTRUCTION COMPANY . DURING THE YEAR UNDER CONSIDERATION, T HE ASSESSEE - FIRM SHOWED LONG TERM CAPITAL GAIN OF R S. 1,95,93,633/ - AFTER TAKIN G INTO CONSIDERATION THE PROCEEDS RECEIVED FROM RELEASE OF FSI IN FAVOUR OF THE DEVELOPERS M/S. JAYCEE CONSTRUCTION CO AND PROCEEDS RECEIVED FROM RELEASE OF FIVE FLATS TO THE GOVERNMENT AND AFTER SUBTRACTING THERE FROM THE INDEXED COST OF PLOT PURCHASED AN D THE CONSTRUCTION COST OF THE FIVE GOVERNMENT FLATS. THE PROPERTY UNDER CONSTRUCTION WAS COVERED BY THE URBAN LAND (CEILING & REGULATIONS) ACT, 1976 AND THE AO FOUND THAT THE FIRM BREACHED CONDITIONS 5 & 9 DEALING WITH THE EXEMPTION THAT WAS AVAILED OF B Y THE FIRM. THE AO FOUND THAT THE CONSTRUCTION ACTIVITY CARRIED OUT BY THE ASSESSEE FIRM WAS IN THE NATURE OF A COMMERCIAL ADVENTURE AND THEREFORE, CANNOT COME WITHIN THE AMBIT OF CAPITAL GAIN RECEIPTS. MOREOVER, THE AO ALSO FOUND THAT THE ASSESSEE FIRM HAD IN ITS PROFIT & LOSS ACCOUNT ALWAYS SHOWN THE CONSTRUCTION WORK CARRIED OUT AS WORK - IN - PROGRESS WHICH SHOWS THAT THE ACTIVITY IS IN THE NATURE OF BUSINESS ACTIVITY. THE AO AFTER CONSIDERING THE PROVISIONS OF URBAN LAND (CEILING & REGULATIONS) ACT, 197 6 AND THE VARIOUS SUBMISSIONS OF THE ASSESSEE TREATED THE PROCEEDS RECEIVED BY THE ASSESSEE FIRM AS ITS BUSINESS INCOME AND PENALTY PROCEEDINGS WERE INITIATED UNDER SECTION 271(1)(C) FOR FILING INACCURATE PARTICULARS. AGGRIEVED WITH THE DECISION OF THE AO, ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) GRANTED RELIEF HOLDING THAT THIS IS NOT A FIT CASE FOR LEVY OF PE NALTY. IN THE PROCESS, HE CONSIDERED THE FACT THAT THE TAXABILITY OF THE SAID GAINS UNDER THE HEAD BUSINESS INCOME OR CAPITAL GAINS IS A MATTER OF DEBATABLE ISSUE. ACCORDINGLY, HE DELETED THE PENALTY LEVIED BY THE AO. PARA 2.10 OF THE IMPUGNED ORDER IS RELEVANT IN THIS REGARD. CIT (A) RELIED ON VARIOUS DECISIONS WHILE DECIDING THE ISSUE AND THE DETAILS ARE GIVEN IN PARA 2.8 OF THE IMPUGNED ORDER. AGGRIEVED WITH THE DECISION OF THE CIT (A), REVENUE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 3 5. DURING THE PROCEEDINGS BEFORE US, AT THE OUTSET, SHRI M.L. PERUMAL, LD DR RELIED ON THE ORDER OF T HE AO AND MENTIONED THAT CONSIDERING THE ASSESSEE AGREED TO THE TAXABILITY OF THE SAID GAINS UNDER THE HEAD BUSINESS INCOME AS HELD BY THE AO AGAINST THE ASSESSEES CLAIM OF CAPITAL GAINS . RELYING ON THE FACTS DISCUSSED BY THE AO / CIT (A), LD COUNSEL MENT IONED THAT THE ISSUE REGARDING THE TAXABILITY OF THE SAID GAINS UNDER THE HEAD BUSINESS OR PROFESSION OR CAPITAL GAINS IS A MATTER OF DEBATABLE ISSUE. FURTHER LD COUNSEL BROUGHT OUR ATTENTION TO PARA 2.10 OF THE IMPUGNED ORDER, WHERE THE CIT (A) DISCUSSED AT LENGTH, HOW THE ISSUE IS DEBATABLE A DEBATABLE ONE, BEFORE GRANTING RELIEF. THE SAID PARA 2.10 READS AS UNDER: 2.10. IN THIS CASE, FROM THE WHOLE DISCUSSION, IT TRANSPIRES THAT THE APPELLANT HAD DISCLOSED ALL THE RELEVANT FACTS IN THE RETURN OF INCO ME BEFORE THE AO. IT IS NOT A CASE WHERE IT WAS FOUND BY THE AO THAT THE APPELLANT HAD CONCEALED SOME PARTICULARS OF ITS INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME. IN THIS CASE, THE INCOME DECLARED BY THE APPELLANT AS LONG TERM CAPITAL GAINS WAS TREATED BY THE AO AS BUSINESS INCOME AGAINST WHICH THE APPELLANT DID NOT PREFER ANY APPEAL BEFORE THE CIT (A). THUS, THE APPELLANT ACCEPTED THE DECISION OF THE AO. HOWEVER, THE FACT REMAINS THAT IT IS A CASE WHERE THE HEAD OF INCOME WAS CHANGE D BY THE AO FROM LONG TERM CAPITAL GAINS TO BUSINESS INCOME . FURTHER, THE ISSUE OF LONG TERM CAPITAL GAINS VS. BUSINESS INCOME IS A DEBATABLE ISSUE AND THE ACCEPTANCE OF THE APPELLANT TO THE FINDING OF THE AO HAS NO BEARING ON THE SAME. FURTHERMORE, IT I S ALSO A CASE WHERE THE CLAIM MADE BY THE APPELLANT IN THE FORM OF LONG TERM CAPITAL GAINS HAVE BEEN DISALLOWED BY THE AO BY TREATING THE SAME AS BUSINESS INCOME, THEREFORE, THE VARIOUS DECISIONS CITED BY THE APPELLANT ARE QUITE RELEVANT TO THE FACT AND C IRCUMSTANCES OF THE CASE, PARTICULARLY THE CASE OF RELIANCE PETRO PRODUCTS LTD . IT IS THE WELL KNOWN THAT ON DEBATABLE ISSUE LIKE THE ONE ON HAND NO PENALTY U/S 271(1)(C) CAN BE LEVIED. FURTHER, THE MERE FACT THAT A CLAIM MADE BY THE APPELLANT HAS BEEN D ISALLOWED BY THE AO IPSO - FACTO DOES NOT LEAD TO THE IMPOSITION OF PENALTY. I FIND A LOT OF FORCE IN THE CONTENTION OF THE APPELLANT THAT ALL THE DETAILS GIVEN IN THE RETURN OF INCOME WERE CORRECT AND THERE WAS A NO CONCEALMENT OF INCOME NOR WERE ANY INACC URATE PARTICULARS OF SUCH INCOME WERE FURNISHED. THE SAME AMOUNT OF INCOME AS RETURNED BY THE ASSESSEE HAS BEEN ASSESSED ALBEIT UNDER A DIFFERENT HEAD. THE ONLY DISPUTE THEREFORE WAS THE HEAD UNDER WHICH THE INCOME RETURNED SHOULD BE TAXED. THE DISPUTE IN THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT WAS SOLELY ON ACCOUNT OF DIFFERENT VIEW TAKEN BY THE AO ON THE SAME SET OF FACTS AND THEREFORE, THEY COULD AT THE MOST, BE TERMED AS DIFFERENCE OF OPINION BUT WOULD NOT CONSTITUTE EITHER CONCEALMENT O F INCOME OR FURNISHING OF INACCURATE PARTICULARS . 6. FROM THE ABOVE, IT IS CLEAR THAT THE ISSUE OF LONG TERM CAPITAL GAINS VS. BUSINESS INCOME IS A DEBATABLE ISSUE AND, IN THE INSTANT CASE, THERE IS NO CONCEALMENT OF THE INCOME OR FURNISHING OF INACCURATE PARTICULARS WHICH ARE THE MAIN INGREDIENTS TO LEVY THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. CONSIDERING THE SAME, WE ARE OF THE OPINION THAT THE CIT (A ) HAS RIGHTLY ADJUDICATED THE ISSUE BY DELETING THE ADDITION MADE BY THE AO. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE 4 ORDER OF THE CIT (A) AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 7. IN TH E RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT IMMEDIATELY AFTER COMPLETION OF HEARING ON 30 TH DAY OF JANUARY, 2014. SD/ - SD/ - (VIVEK VARMA) (D. KARUNAKARA RAO) JUDICIA L MEMBER ACCOUNTANT MEMBER MUMBAI ; 30.1.2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI